Friday, September 26, 2014

As a matter of habit, we
all concern ourselves with the employment/unemployment situation in our home
countries and pretty much ignore what happens elsewhere unless it happens to
impact us directly. A recent report prepared for the G20 Labour and
Employment Ministerial Meeting looks at the global employment picture and
provides us with a glimpse of the outlook and key challenges that face global
labour markets.

As we all know,
persistent low growth rates in most of the world's Western economies are having
a dampening effect on employment which, in turn, is having a dampening effect
on the economy. The world's economy is caught in a cycle from which there
is no easy escape. Just ask your friendly central banker. None of
their usual monetary magic has been able to resuscitate the world's moribund
economy. On top of the job creation issues, the jobs that are being
created are of poor quality with real wages stagnating at levels that are
resulting in even greater income inequality.

Over the past 12 months,
most of the G20 economies have seen what can only be termed as modest reductions
in their unemployment rate and in those nations where the unemployment rate has
declined, the decline was often due to a shrinking labor force participation
rate with the United States being a prime example as shown here:

In the United States, the current labour force participation rate is 62.8 percent, down from a high of 67.3 percent in 2001 and about the level that was seen in 1978.

As well, in nations like
Spain, the United States, Italy and South Africa, long-term unemployment has
increased. Here is a bar graph that shows the long-term unemployment rate
in the fourth quarter of 2007 on the blue bars and the long-term unemployment
rate in the first quarter of 2014 with a grey dot:

Among the G20 as a whole,
the median of long-term unemployment as a percentage of total unemployment has
risen from 24.6 percent at the end of 2007 to 30.2 percent in the first quarter
of 2014, an increase of 22.8 percent.

Here is a chart showing
the year-over-year changes in the labour markets of the G20 nations:

You'll notice that the
situation for younger potential workers is dire; of the 20 nations, 6 have
youth unemployment rates in excess of 20 percent with Spain coming in first
place at 53.1 percent and South Africa coming in second at 52.5 percent.
Here is a bar graph showing the unemployment rates for youth aged 15 and
16 to 24 years of age for 2007 in blue and the second quarter of 2014 in grey:

Here is a graph that
shows the relationship between the growth in real GDP and the growth in total
employment over the period from 2008 to 2013:

Notice the 45 degree line?
That line marks the points where real GDP growth equals growth in total
employment. In almost all G20 nations, real GDP has grown at rates in
excess of the rate of growth of total employment, making this a relatively
jobless recovery. You will also notice that the US economy has among the lowest real GDP growth and the lowest increase in total employment among its G20 peers.

This has resulted in a
jobs gap among advanced G20 economies as you can see on this graph:

Had the world's economy
continued along its growth pattern that was established prior to the Great
Recession, it was projected that there would be about 480 million employed
workers in the advanced G20 economies by 2014 as shown on the blue dashed line.
Right now, there are only around 445 million employed workers, a jobs gap
of 35 million. On top of the jobs gap in the G20 advanced economies,
there is a jobs gap of around 40 million in the G20 emerging economies as shown
on this graph:

As you noticed on the
chart summarizing the labour market changes over the past year, employment
rates vary widely by age. This graph shows the employment rate by age
grouping and gender for all G20 nations:

The total share of the
population that has found work varies widely across the G20, from 42 percent in
South Africa to 75 percent in China with the United States coming in at 67
percent and Canada coming in at 72 percent.

It is obvious that
central banks around the world have been completely incapable of creating
sufficient high quality jobs to eliminate the jobs gap that has appeared since
the beginning of the Great Recession. When potential workers have no
means of support other than temporary government social programs, they cut back
on consumption. In our consumption oriented economy, without that
consumption, we can only expect that the world's economy will continue to grow
at rates that are nowhere near what we experienced prior to 2008.

1 comment:

Creating jobs in a mature market should be required to pass a certain "taste" test. It should be pointed out that while America is creating jobs it is costing a huge amount. I'm referring to the massive government deficit which I feel is the fuel driving our still rather weak growth. Is it sustainable, and just as important are these the right kind of jobs and will they last?

When a job that falls outside the description of government worker fails to make economic sense it becomes a form of working welfare with the taxpayer picking up the tab. We as a country and as a society have paid dearly for each unsustainable job created through government incentives and partnerships, because of the nature of many of these jobs we might even call them temporary. More on this subject in the article below.

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About Me

I have been an avid follower of the world's political and economic scene since the great gold rush of 1979 - 1980 when it seemed that the world's economic system was on the verge of collapse. I am most concerned about the mounting level of government debt and the lack of political will to solve the problem. Actions need to be taken sooner rather than later when demographic issues will make solutions far more difficult. As a geoscientist, I am also concerned about the world's energy future; as we reach peak cheap oil, we need to find viable long-term solutions to what will ultimately become a supply-demand imbalance.